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Consider a two-year 2 5 8 T-note, with face value M = 100,000, and semi-annual yield to maturity y4(Coupon) = 1%. Consider also a ten-year 3 48 T-bond, also with face value M = 100,000, and semi-annual yield to maturity y20(Coupon) = 2%. Assume you expect the term structure to steepen. What trading strategy would you implement that would allow you to benefit from the steepening, while neutralizing the risk fromparallel shifts?
Assume that indeed the term structure immediately steepens: y4 (Coupon)′= 2.5% andy20 (Coupon)′= 5%. What are the profits from the trade? (You can use the duration based approximation to calculate the cash flows generated by your portfolio.)
The probability of winning a $ 50 prize is 40%, and the probability of winning a prize of $ 100 is 60%. What is the expected value of a prize in the game?
a) The ARA Corporation bonds have a coupon of 14%, pay interest semi-annually, and they will mature in 7 years. Your required rate of return for such an investm
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There is a 10 years bond with 2000 face value making annual payments. And it has a coupon rate of 10%, offering a yield to maturity is 9%
compute the standard deviation given these four economic states their likelihoods and the potential returnseconomic
The firm also has $450,000 of debt outstanding that is selling at 98 percent of par that has a yield to maturity of 7.2 percent. The tax rate is 35 percent.
You invest $3,270 each year, starting next year, for 7 years. If your investments earn 4.72% APR, compounded annually, how much would you have in the account in
To implement a corporate strategy, a firm needs to have a strong set of capabilities to "parent" the set of business units that the firm has established
What is the profitability index value if the required return is 12.6 percent?
The 12-month, 15-month, 18-month zero rates are 4.5%, 4.6%, 4.7% with continuous compounding. What is the value of an FRA that enables the holder to earn 5.6% (with semiannual compounding) for a 3-month period starting in 1 year on a principal of ..
(Stock splits) TOTAL Group recently declared a 4-for-1 stock split for its common shares. Before the split the firm's share price had risen to € 200 per share.
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